Energy assets losing value

Energy assets losing value - The West Australian

WA taxpayers are wearing huge writedowns on electricity assets because the State Government insists on owning them, the energy industry says.

Amid a major review of the electricity market covering Perth and the South West, the Energy Supply Association of Australia urged the Government to sell its power plants and networks while they still had value.

The ESAA represents State-owned power utilities Western Power, Synergy and Horizon Power, among other members.

About 80 per cent of the electricity industry in the South West is owned by the State.

The ESAA said its value would have dropped by billions over the past 15 years.

Energy Minister Mike Nahan launched a root-and-branch review of the South West electricity market this month as part of efforts to rein in mounting costs and find efficiencies.

Citing the experience of NSW, where assets valued at up to $30 billion in the 1990s are now being sold for $2.5 billion, ESAA boss Matthew Warren said WA faced a stark financial choice as the owner of electricity utilities.

Energy demand is falling in the State after decades of growth as consumers respond to higher prices, buy efficient appliances and install solar panels.

Mr Warren said the effect of the trend, coupled with the prospect of further technological changes, was reducing the value of traditional electricity assets such as coal-fired power plants and networks of poles and wires.

He said the State Government should consider offloading the assets as soon as it could or taxpayers would be on the hook for the losses that would follow.

"It's not for any ideological bent," Mr Warren said.

"It's because for you, the owner of the assets, which is the people of WA, (privatisation) is the best outcome for you in extracting value from those assets."

As technology advanced and consumers learnt to adapt, Mr Warren said the usefulness of smart meters would grow for customers and network operators.

He said the "jungle drums were well and truly beating" when it came to the risk of customers disconnecting from the grid as technology improved.

WA needed to ensure it was prepared.

Among the other priorities the ESAA will present to the review is the need for electricity tariffs to reflect cost of production, independent price-setting and the retention of the State's gas reservation policy.